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Imports drive up current account deficit

Embargoed until 10:45am – 19 September 2008

Imports drive up current account deficit

The seasonally adjusted current account deficit widened $1,097 million in the June 2008 quarter to $4,623 million, Statistics New Zealand said today. The larger deficit this quarter was mainly due to a rise in goods imports and foreign investors earning more on their New Zealand investments.

Seasonally adjusted goods imports were up $753 million, mainly caused by rises in petroleum and petroleum products and capital goods. Exports of goods fell slightly, with a drop in dairy export volumes partly offset by a rise in crude oil exports. As a result, the seasonally adjusted goods deficit increased $867 million to $1,066 million in the June 2008 quarter.

Income earned by foreign investors from their investments in New Zealand increased $214 million.

This was mostly due to a rise in profits and dividends from foreign investment in New Zealand companies. New Zealand earnings from its investments abroad fell $18 million, mostly due to a fall in profits of overseas subsidiaries of New Zealand companies.

The current account deficit for the June 2008 year was $14,967 million, compared with $14,096 million for the June 2007 year. The larger deficit this year is due to an increase in the investment income deficit.

A current account deficit is financed by either increasing foreign liabilities, reducing foreign assets, or a combination of both. In the June 2008 quarter, New Zealand’s current account deficit was financed by a $4.5 billion net inflow of capital, primarily due to a reduction in New Zealand’s foreign assets. The reduction of foreign assets has caused net liabilities with the rest of the rest of the world to increase. At 30 June 2008, New Zealand's overseas liabilities exceeded its assets abroad by $159.2 billion, an increase of $5.3 billion from 31 March 2008.

Geoff Bascand
Government Statistician
19 September 2008

ENDS

See also the Hot Off The Press information release Balance of Payments and International Investment Position: June 2008 quarter.

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